Marketing Communications Review

Chapter 15: Marketing Communications

Marketing Communications (MarCom)

• Definition: The concept of integrating all elements of the promotional mix to work cohesively.

Components of the Promotional Mix

• Advertising:

  • Definition: Mass communication paid for by marketers to promote products or services.

• Public Relations (PR):

  • Definition: Unpaid media coverage that helps build a positive image but offers limited control.

• Sales Promotions:

  • Definition: Activities aimed at stimulating consumer demand, which can have various objectives.

• Personal Selling:

  • Definition: Involves direct, face-to-face interaction with potential customers; noted for being high impact but costly.

• Social Media:

  • Definition: Platforms that facilitate interaction and engagement with customers.

• Integrated Marketing Communications (IMC):

  • Definition: Strategy that ensures all forms of communications and messages are carefully linked together.

Impact of Digital Platforms on Marketing Communication

• Consumer Empowerment:

  • Consumers have become senders of messages, instead of just brands.

• Feedback Channels:

  • Feedback is more personalized and less numerical, changing how brands interact with consumers.

Communication Process (Exhibit 15.2)

1. Sender:

   • The entity that initiates the communication (e.g., marketing manager, advertising agency).

2. Encoding the Message:

   • The process of turning thoughts into communication forms (e.g., advertisements, sales presentations).

3. Message Channel:

   • Various mediums, such as social media, direct advertising, or press releases, through which the message is transmitted.

4. Decoding the Message:

   • How the receiver interprets the message (influenced by prior experiences and results).

5. Receiver:

   • The intended audience that receives the message (e.g., customers, media, general public).

6. Noise:

   • Any external factors that can distort the message (e.g., other competing advertisements, news articles).

7. Feedback Channel:

   • Data-driven insights and responses from the target audience (e.g., sales results, market research).

Role of Promotion in the Marketing Mix (Exhibit 15.1)

• Overall Marketing Objectives:

  • Aligning promotional efforts with broader business strategies.

• Marketing Mix Elements:

  • Breakdown of product, place, promotion, and price.

• Promotion Plan:

  • Strategy designed to engage with the target market effectively.

Goals of Promotion (Sections 15-3)

1. Modify Behavior and Thoughts:

   • Promotions aim to influence consumer intentions and actions.

Key Objectives of Promotion:

• Inform the Target Audience:

  • Transforming needs into wants or generating interest in new products.

  • Often utilized during the initial stages of a product lifecycle.

  • Important for complex products (e.g., technology).

  • Example: PR activities during product launches.

• Persuade the Target Audience:

  • Encouraging purchases or actions; emphasizes competitive advantages.

  • Typically occurs during the growth stage where awareness is established.

  • Appeals to both rational and emotional needs (e.g., branding).

  • Example: Pampers' advertising strategies.

• Remind the Target Audience:

  • Keeping the product or brand top-of-mind in a competitive marketplace.

  • Used when consumers are already aware of the product, typically in the maturity stage.

  • Example: Pepsi's marketing tactics to reinforce brand recognition.

• Connect with the Audience:

  • Using social media to build customer relationships.

  • Aims for customer engagement and advocacy.

  • Example: KFC's Unboring Morning Campaign.

The Promotional Mix (Section 15-4)

• Definition: The combination of promotional tools (advertising, PR, personal selling, sales promotion, and social media) designed to meet target market needs and organizational goals.

Advertising:

• Description: Impersonal and paid communication to relevant audiences.

• Trend: Shifting budgets from traditional media to digital platforms.

• Cost Structure: Low cost per contact, but overall costs can be substantial.

Public Relations:

• Definition: Evaluates public attitudes and implements programs to improve understanding and acceptance.

• Purpose: Communicates with multiple stakeholders (customers, employees, government).

• Key Component: Publicity as a form of non-paid promotion.

  • Example: Issues faced by Domino's Pizza.

Sales Promotion:

• Definition: Activities designed to stimulate consumer purchasing and dealer effectiveness apart from regular advertising.

• Characteristics: Primarily a short-term strategy meant to catalyze immediate sales increases.

  • Examples: Free samples, contests, coupons, experiential marketing.

Personal Selling:

• Definition: Direct communication between a salesperson and potential customers.

• Evolution:

  • From transactional to relationship-oriented approaches, increasingly supported by digital tools.

Content Marketing and Social Media:

• Content Marketing: Creating valuable content that attracts and engages target audiences.

• Social Media: Tools that foster interaction and enhance engagement among users, integrated into marketing strategies.

The Modern Communication Process and Promotional Mix:

• Shift in Power: Consumers increasingly control brand messages and communication processes.

• Differences in Promotional Tools:

  • Varying effects on audiences, depending on whether interactions are personal or impersonal, quick or slow feedback styles.

Digital Promotional Tactics:

1. Paid Media: Traditional advertising where brands pay for exposure (e.g., banner ads).

2. Earned Media: PR-oriented, customers generate discussion about brands.

3. Owned Media: Brands as publishers of their own content to enhance value for customers (e.g., websites, blogs, social media).

AIDA Model (Sections 15-5)

• Definition: A marketing model that outlines consumer interaction stages with promotional messages - (Attention, Interest, Desire, Action).

  1. Attention: Capturing the audience's awareness.

  2. Interest: Creating a genuine interest in the product.

  3. Desire: Convincing consumers that the product fulfills their needs best.

  4. Action: Motivating the consumer to make a purchase.

• Effectiveness of Promotional Tools (Exhibit 15.5):

  • Varies by phase of AIDA, with some tools being more effective than others at different stages.

Factors Affecting the Promotional Mix:

• Product Nature:

  • Differentiates between business and consumer products and their complexity.

• Product Life Cycle Stages:

  • Heavy focus on informative advertising in initial phases.

• Types of Buying Decisions:

  • Routine versus complex decisions dictate promotional strategies.

Push and Pull Marketing Strategies:

• Push Strategy:

  • Focused on convincing retailers to carry products through aggressive promotion.

• Pull Strategy:

  • Stimulates consumer demand to encourage distribution from retailers.

• Combination Use:

  • Most organizations implement a mix of both strategies based on product needs.

Exhibits:

• Push vs. Pull Strategy (Exhibit 15.7):

  • Illustrates the flow of demand from manufacturers to consumers through various strategies.

• Product Life Cycle Effect on Promotional Mix (Exhibit 15.6):

  • Tracks how advertising and PR strategies change from introduction to decline phases in a product's lifecycle.

Chapter 16: Advertising, Public Relations, and Sales Promotion

• Instructor: Prof. Sam Lee

Context of This Chapter - Advertising:

• Role of Promotion in marketing mix:

  • Overall marketing objectives

  • Marketing Mix Components:

  • Product

  • Place (distribution)

  • Promotion

  • Price

• Promotional Mix Components:

  • Advertising

  • Public relations

  • Sales promotion

  • Personal selling

  • Social media

• Target market analysis and promotion plan development.

Advertising

• Definition of Advertising:

  • Impersonal, one-way mass communication paid for by a marketer, aimed at long-term sales increases.

• Advertising Response Function:

  • Typically exhibits an elongated “S” shape.

  • Critical question:

  • How much to spend on advertising to generate awareness?

  • Relationship:

  • Strong brands and advertising spending impact brand equity.

Advertising Response Function - Elongated "S"

• Purpose of Advertising Response Function:

  • Measures how sales increase as advertising investment rises.

• Key Aspects:

  • Efficiency improves as the ad budget rises to an optimal level ("To Be Heard").

  • Diminishing returns may occur on incremental advertising spending.

Major Types of Advertising

• Types:

  • Institutional Advertising:

  • Focuses on the brand, business, or organization as a whole.

  • Example: Advocacy advertising (e.g., Airbnb's #WeAccept).

  • Product Advertising:

  • Focused on promotion of specific products.

  • Pioneering Advertising:

  • Introduces a new product or category; prevalent in the early stages of the Product Life Cycle (PLC).

  • Competitive Advertising:

  • Persuasive message to enhance recall and consumer preference; emotionally driven; prominent in growth phase.

  • Example: Samsung S4 campaign.

  • Comparative Advertising:

  • Compares two or more brands to highlight differences; beneficial for lesser-known brands.

  • Example: Burger King vs. McDonald's using MC Hammer.

  • Demonstration Advertising:

  • Shows product use in real-life contexts.

  • Example: Pampers at 3 AM.

Creative Decisions in Advertising

• Key Concepts:

  • Unique Selling Proposition (USP):

  • The defining unique benefit that sets the product apart from competitors.

  • DAGMAR Approach:

  • Stands for Defining Advertising Goals for Measured Advertising Results.

  • Focus on identifying products’ attributes and benefits; promote benefits rather than just attributes.

  • Example: Kind Bars marketed as healthy snack bars due to healthy ingredients.

  • Developing Advertising Appeals:

  • Possible appeals include savings, fear, admiration, convenience, fun, etc.

  • Executing the Message:

  • Message delivery through various styles: lifestyle, slice-of-life, humor, fantasy, scientific defense, etc.

  • Post-Campaign Evaluation:

  • Example: Pizza Hut evaluated campaign performance at the conclusion.

Exhibit 16.1: Common Advertising Appeals

• Types of Appeals and their Goals:

  • Profit:

  • Informs consumers regarding cost savings or gains.

  • Health:

  • Targets health-conscious individuals or those seeking wellness (often used in beauty products).

  • Fear:

  • Highlights anxieties such as aging or health loss; requires careful execution.

  • Admiration:

  • Utilizes celebrity endorsements.

  • Convenience:

  • Promotes ease of use for quick-service foods.

  • Fun and Pleasure:

  • Represents leisure products like vacations or entertainment.

  • Vanity and Egotism:

  • Focused on high-end consumer goods.

  • Environmental Consciousness:

  • Promoted in campaigns aimed at ecological preservation.

Advertising Types Examples

• Examples by Type:

  • Admiration:

  • Old Spice's "The Man Your Man Could Smell Like."

  • Demonstration:

  • Flextape advertisement.

  • Humor:

  • Axe Effect - Security Girl ad.

  • Comparative:

  • Pepsi's advertisement featuring MC Hammer.

  • Pioneering:

  • A type that does not encourage a specific brand but demonstrates product benefits educationally.

Global Advertising

• Global Considerations:

  • Advergaming:

  • Example of Hong Kong's Coke Chok Chok.

  • Comparative Ads Restrictions:

  • Many international markets do not allow comparative advertisements.

  • Case Studies:

  • Original and Korean versions of the Pepsi advertising campaign.

  • Cultural impacts demonstrated in advertisements:

    • Coke's Ramadan 2018 campaign

    • Unique features of Japanese commercials

    • Thailand's Unsung Hero.

• Media Decisions in Advertising:

  • Media Planning:

  • Involves determining media type, mix, and scheduling.

  • Media Types Include:

  • Newspapers, Magazines, Television (including infomercials), Radio, Outdoor, Internet, Alternative media (e.g., shopping carts, screensavers).

  • Considerations for Media Selection:

  • Media Mix Factors:

    • Cost, Reach, Frequency, Audience Selectivity, CPC (Cost per Click), CPM (Cost per Thousand).

  • Media Scheduling Methods:

    • Continuous, Flighted, and Pulsing (a combination of continuous and flighted), Seasonal approaches.

Public Relations

• Definition:

  • Proactive communication that is not paid for, characterized by high credibility; however, control is less assured.

• Includes:

  • Press relations, Product publicity, and Lobbying.

• Major Tools and Techniques:

  • New product publicity

  • Product placement (Top 10 PPL examples).

  • Consumer education initiatives.

  • Sponsorships that align brands with specific events.

  • Experiential marketing (e.g., product sampling, demonstrations, and festivals) exemplified by JetBlue’s Palm Springs initiative.

  • Crisis Management:

  • Strategies for handling public relations crises effectively.

Sales Promotion

• Definition:

  • Marketing efforts designed for short-term objectives, usually aimed at generating product trials and boosting sales.

Types of Sales Promotions:

• Consumer Promotions:

  • Coupons and rebates (noted for low redemption rates).

  • Premiums adding value.

  • Contests and sweepstakes for engagement.

  • Loyalty programs to encourage repeat purchases.

  • Point-of-Purchase promotions (including sampling) encouraging immediate purchasing decisions.

  • Note: Discussed is a tragedy associated with a Pepsi promotion.

• Trade Promotions:

  • Directed at intermediaries; involves:

  • Trade allowances (discounts for large orders).

  • Push money provided to incentivize retailers for pushing products.

  • Training programs for intermediates.

Other Concepts to Know

• Internet Impact on Advertising:

  • Allows real-time performance monitoring of advertisements.

• Important Metrics in Advertising:

  • CPM (Cost per Thousand), CPC (Cost per Click), Reach (the number of target consumers delivered), Frequency (the number of exposures experienced by an individual).

• Steps in an Advertisement Campaign:

  • Establish objectives, choose campaign type, identify product benefits, select advertising appeal (profit, health, fear, admiration, convenience, fun, vanity, environmental), execute the message, and conduct post-campaign evaluation.

• Media Budgeting Approaches:

  • Competitive parity method, percentage of sales method.

• Media Saturation:

  • Beyond a certain saturation point, increased media spend results in no additional consumer response.

• Use of USP (Unique Selling Proposition):

  • The primary advertising appeal within a campaign.

• Product Placement (PPL):

  • Advantageous as consumers cannot skip over product placements as they can with traditional advertisements.

Summary of Key Points

• Advertising Response Function:

  • Structured as an elongated S figure illustrating the relationship between ad spend and resultant sales increases.

• Various Types of Advertising:

  • Institutional Advertising: Focus on company operations and reputation.

  • Product Advertising Types: Include pioneering, competitive, comparative, demonstration advertising styles.

• Creative Decisions in Advertising:

  • Importance of USP, distinguishing between product attributes vs. benefits, advertising appeal selection, message execution, and post-campaign evaluation techniques.

• Media Decisions:

  • Media planning requires a well-thought-out media mix (considerations of cost, reach, frequency) and scheduling strategies (continuous, flighted, pulsing, seasonal).

• Pre-ad and Post-ad Testing:

  • Pre-ad Test with storyboard results, conducted on Feb 8, 2011 (N=60) assessing:

  • Overall likability: 93%

  • Purchase intent: 87%

  • Good copy & contents: 70%

  • Easy to understand: 90%

  • Message delivery: 73%

  • Memorable: 87%

  • New & unique: 67%

  • Interesting: 90%

  • Post-ad Test including qualitative and quantitative feedback conducted on various dates, also focusing on metrics for evaluating effectiveness such as purchase intent and overall likability across campaigns.

Chapter 17: Personal Selling

Overview of Personal Selling

• Definition:

  • Personal selling refers to face-to-face communication characterized by a two-way flow of communication between a salesperson and a potential buyer.

• Cost Considerations:

  • Personal selling is generally considered expensive; thus, it is particularly useful under certain conditions:

  • High Transaction Value: Products with significant monetary value.

  • Custom/Complex Products: Items that are tailor-made or involve intricate features.

  • Limited Customer Base: Situations where there are only a few potential customers.

  • Later Purchase Stages: The buyer is nearing a decision to purchase.

Comparison: Personal Selling vs. Advertising/Sales Promotion

Situations Favoring Personal Selling:

1. High product value.

2. Custom-made products.

3. Few customers.

4. Technically complex products.

5. Geographically concentrated customers.

   • Examples:

   • Insurance policies, custom windows, airplane engines.

Situations Favoring Advertising/Sales Promotion:

1. Low product value.

2. Standardized products.

3. Many customers.

4. Products easy to understand.

5. Geographically dispersed customers.

   • Examples:

   • Soap, magazine subscriptions, T-shirts.

Sales Force Costs Across Selected Industries

• Industry Breakdown:

  • Banking: 0.9%

  • Business Services: 10.5%

  • Chemicals: 3.4%

  • Communications: 9.9%

  • Construction: 7.1%

  • Consumer Wholesale: 11.2%

  • Average across industries: 10.0%

  • Note:

  • Industries such as printing/publishing (22.2%) and machinery (11.3%) show notably higher costs relative to sales.

Relationship Selling

• Definition:

  • Relationship selling is contrasted with transactional selling, highlighting the new approach in personal selling that emphasizes creating long-term relationships.

• Role of the Salesperson:

  • Acts as a consultant rather than just a seller.

  • Works to foster partnerships through extensive consultation and follow-ups.

  • Example:

  • Ogilvy & Mather’s Mah Bing Zeat exemplifies effective relationship selling.

Steps in the Selling Process

Transactional Selling Style vs. Relationship Selling Style:

• Transactional Sales Model:

  • Focus on generating leads

  • Frequent presentations

  • Minimal questions

  • Little effort to match needs

  • Difficulty in closing sales

  • Limited follow-up

  • Low concern for satisfaction

  • Few repeat sales

  • Compete mainly on price

• Relationship Selling Model:

  • Strategically identify leads

  • Research prospects

  • Extensive questioning

  • Match needs to solutions

  • Easier to close sales

  • Regular follow-up

  • High concern for satisfaction

  • Focus on repeat business

  • Garner higher purchase shares

Transactional vs. Solutions Selling Models

• Transactional Selling:

  • Involves general business skills.

  • Focused on selling product, price, and service.

  • Bases differentiation primarily on products.

  • Revenue focus is on immediate sales.

• Solution/Consultative Selling:

  • Engages customer collaboratively.

  • Focus is on providing customer solutions.

  • Differentiation is achieved through personal relationships.

  • Revenue is based on customer lifetime value.

  • Establishes buyer-seller relationship as that of a trusted business advisor.

Customer Relationship Management (CRM)

• Overview:

  • CRM is a systemic approach that centers on understanding customer needs and managing interactions across channels.

• Main Concepts in CRM:

  1. Identify Customer Relationships:

  • Recognizing and mapping out various relationships that an organization has with its customers.

  1. Understand Interactions:

  • Analyze how existing customers interact with the company.

  1. Capture Customer Data:

  • Collect relevant data to learn and adapt offerings.

  1. Leverage Information:

  • Utilize collected data to better meet customer needs and enhance sales.

• Data Warehouse and Data Mining:

  • Data Warehouse:

  • Centralized repository for stored customer data.

  • Data Mining:

  • Process of identifying hidden patterns and relationships in data, which can inform business strategies.

  • Data Collection Plan:

    • A structured plan for gathering data from the beginning of the customer relationship throughout all ongoing interactions.

Steps in Personal Selling

6. Generate Leads (Prospecting):

   • Use networking, referrals, and databases to create a list of potential buyers.

7. Qualifying Leads:

   • Assess the needs, buying power, and attitudes of prospects regarding the company's products.

8. Approach Customers:

   • Understand customer needs and the competitive landscape.

9. Develop and Propose Solutions:

   • Demonstrate the value of the offerings to buyers.

10. Handling Objections:

    • Anticipate and investigate concerns, seeing objections as opportunities to close sales.

11. Closing the Sale and Following Up:

    • Focus on negotiation towards value and ensure post-sale follow-up.

Sales Management

12. Defining Sales Goals:

    • Establish clear quotas for performance.

13. Determining Sales Force Structure:

    • Organize by regions, product lines, markets, or client segments.

14. Recruiting and Training:

    • Identify desirable traits in applicants and provide necessary training.

15. Compensating and Motivating:

    • Develop incentives to encourage performance.

16. Evaluating Sales Force:

    • Assess effectiveness regularly and adjust strategies as needed.

17. Sales Turnover Consideration:

    • Awareness of high turnover in early careers due to immediate performance visibility.

Comparison of Inside vs. Outside Sales

• Outside Salespeople:

  • Self-starters

  • Manage their own schedules

  • Frequent travel expectations

  • Less direct supervision

  • High importance on appearance

• Inside Salespeople:

  • Must articulate effectively

  • More structured schedule

  • Office-based

  • More supervision

  • Workplace dynamics influence.

Personal Selling & Sales Management in the Marketing Mix

• Marketing Mix Components:

  • Products: Include personal selling as part of the selling process.

  • Promotion: Comprises advertising, public relations, and sales promotion.

  • Sales Management: Focuses on planning, motivating staff, budgeting, compensation, territory design, training, and performance evaluation.

Chapter 18: Social Media and Marketing

Understanding Social Media

• Definition of Social Media:

  • Internet-based services designed to facilitate conversations and social interactions.

  • Has significantly affected market operations.

  • Additionally, does not inherently focus on marketing but offers marketers opportunities.

  • Leverages word-of-mouth advertising.

Consumer Usage:

• Consumers utilize social media for search and evaluation of products.

• Platforms:

  • Notable social media platforms include Facebook, Twitter, YouTube, and LinkedIn, particularly for job seekers and hiring companies.

Marketing Opportunities

• Social media serves as a platform for marketers to share messages and devise new initiatives.

• Opinion Leaders:

  • Influential social media users who vocally impact others.

• Control of information shifts from marketers to consumers.

• Marketers must strategize usage; budgets are shifting from traditional to social media methods.

• Marketers are utilizing social media not only for promotion but also for product creation, exemplified by efforts like McDonald's My Burger (crowdsourcing).

Social Commerce

• Revenue Generation:

  • Social commerce has produced millions in revenue, with nearly 50% of all online sales originating from social media avenues.

• Types of Social Media Revenue Models:

  • Peer-to-peer sales platforms (e.g., eBay, Etsy).

  • Sales-driven social networking sites (e.g., Pinterest, Twitter).

  • Group buying websites (e.g., Groupon).

  • Peer recommendation platforms (e.g., Yelp, JustBoughtIt).

  • User-curated shopping sites (e.g., The Fancy, Lyst).

  • Social shopping sites (e.g., Motilo, GoTryItOn).

  • Shoppable videos from retailers (e.g., Burberry, Diesel).

Creating a Social Media Campaign

• Categories of Social Media:

  • Owned Media:

  • Content created by the brand itself, including websites, Facebook pages, blogs, etc.

  • Earned Media:

  • Public relations-like efforts occurring in an online context.

  • Paid Media:

  • This is parallel to traditional paid advertising.

• Strategic Utilization:

  • Marketers should leverage all three categories for an effective social media strategy, which should consist of:

  • Listening and learning from consumers.

  • Creating awareness and building relationships.

  • Promoting products.

  • Managing customer relations.

Framework for a Social Media Plan

• Customer Listening:

  • Engaging in social media monitoring to grasp how target audiences utilize social platforms (example: TB Social Media War Room).

• Set Objectives:

  • Establishing measurable and clearly defined goals for social media engagements.

• Define Strategies:

  • Tailoring approaches based on insights gathered.

• Identify Target Audience:

  • Clearly delineating which demographics to focus on.

• Select Tools and Platforms:

  • Deciding on which platforms to execute the strategy.

• Implementation and Monitoring:

  • Encompassing real-time responses to customer interactions; a company should respond to negative feedback across all of its social media accounts to prevent misinformation from spreading.

Evaluation and Measurement of Social Media Efforts

• Measuring ROI:

  • Despite challenges, there's a recognized need for formal evaluation methods among marketers.

• Five Steps to Evaluate Social Media Effectiveness:

  1. Identify key performance indicators (KPIs).

  2. Align social media goals with overarching business objectives.

  3. Set up tools (such as Google Analytics) for conversion tracking.

  4. Assign values to these KPIs (like lifetime value or average sales).

  5. Compare results with competitors to benchmark performance.

Social Behavior of Consumers

• Forrester Research Findings:

  • Established six categories of social media users:

  1. Creators:

     • Produce and share original online content (e.g., blogs, websites, articles, videos). This is a rapidly growing user segment.

  2. Conversationalists:

     • Engage in content creation mainly to communicate, like status updates.

  3. Critics:

     • Observe and post comments, ratings, and reviews across blogs and forums; essential for interactive engagement.

  4. Collectors:

     • Utilize RSS feeds for information curation and website ratings.

  5. Joiners:

     • Maintain social profiles and engage with other sites.

  6. Spectators:

     • Consume media preferences passively (e.g., reading blogs, watching videos); this is the largest user category.

  7. Inactives:

     • The smallest segment; these individuals do not engage in any activities mentioned above.

Influencer Attention

• Increased attention to social media influencers spanning various domains (celebrities and micro-influencers) impacts consumer behavior significantly.

Types of Influencers

• Social Media Celebrities:

  • Individuals like actors, singers, and athletes with vast followings.

• Social Media Stars:

  • Individuals notable in particular specialized areas (e.g., gaming, fashion).

• Micro-influencers:

  • Users with smaller follower counts but impactful in specific fields.

Tools and Platforms for Social Media

Types of Social Media Tools:

• Blogs (corporate and non-corporate) for personal opinions.

• Microblogs (e.g., Twitter, Tumblr) for brief updates.

• Social Networks (e.g., Facebook, MySpace, LinkedIn).

• Media Sharing Sites (e.g., YouTube, Flickr) for images/audio/video.

• Social News Sites (e.g., Reddit, Digg) that curate based on popularity.

• Location-Based Social Networking Sites (e.g., GoWalla, Foursquare).

• Review Platforms (e.g., Yelp, Rotten Tomatoes).

• Live Streaming:

  • Platforms such as Twitch.

The Intersection of Social Media and Mobile Technology

Mobile Platforms:

• This segment is expanding rapidly due to:

  • Standardized platforms lowering entry barriers.

  • Younger audiences being more receptive.

  • Smartphones providing accessibility.

  • Real-time metrics enabling measurable outcomes.

Applications (Apps) and Widgets:

• Numerous apps are launched daily.

• Widgets simplify integration within web pages.

Impact of Apps:

• The evolving nature of apps contributes significantly to business strategies.

Mobile Marketing Tools

Common Mobile Marketing Tools:

• SMS (Short Message Service):

  • 160-character texts; deeply integrated with other platforms.

• MMS (Multimedia Messaging Service):

  • Similar to SMS but supports multimedia attachments.

• Mobile Websites:

  • Sites optimized for mobile navigation.

• Mobile Ads:

  • Integrated ads within texts, apps, and mobile sites, often sold on a cost-per-click basis.

• Bluetooth Marketing:

  • Messages sent to Bluetooth-enabled devices according to users' locations.

• Smartphone Applications:

  • Customized software for mobile and tablet devices.

Conclusion: Key Implications of Social Media Marketing

• Business Viability:

  • Identifying potential social media-driven business ideas is feasible.

• Challenges:

  • Central obstacles include strategizing for successful execution.

• Examples:

  • Notable business models include platform-based applications (e.g., Driveway Parking, Food Delivery).

• Skills Development:

  • Marketers should reflect on strengthening their skill sets to become adept in social media marketing.

Additional Concepts to Know

• Crowdsourcing:

  • Leveraging social media to gather ideas or feedback from followers for new marketing initiatives.

• Crowdfunding:

  • The process of securing funds through follower contributions.

• Participation Metrics:

  • Measures that indicate user engagement, such as likes, comments, and shares.

• Opinion Leaders:

  • Vocal individuals on social media whose opinions can influence others significantly.

• Setting Goals:

  • Establishing clear, measurable objectives for social media strategies is essential.

• LinkedIn:

  • A platform serving dual purposes – aiding job seekers in their search and enabling employers to discover potential hires.

Chapter 19: Pricing Overview

Professor Sam Lee is teaching.

Pricing Concepts

• Definition:

  • Pricing is the payment made in exchange for a product or service.

• Impact:

  • Price has a direct and immediate impact on both topline (revenue) and bottomline (profitability).

• Effects of Price:

  • Sacrifice Effect:

  • Refers to what the customer sacrifices or gives up when making a purchase.

  • Reward Effect:

  • Refers to what is gained or the benefits derived from the purchase (e.g., satisfaction, utility).

  • Information Effect:

  • The price conveys information about the product; e.g., a $20,000 Patek Philippe watch versus a $10 Casio watch.

  • Examples:

  • A $100 Philly Cheesesteak sandwich serves as an example of perceived value through pricing.

• Revenue Calculation:

  • Formula:
    $ext{Revenue} = ext{Price} imes ext{Units}$

  • (This should be compared with profits).

• Profit Calculation:

  • Formula:
    $ext{Profit} = ext{Revenue} - ext{Expenses}$

Pricing Concepts - Continued

• Cost Types:

  • Fixed Cost:

  • Costs such as salaries and rent that do not change in proportion to activity.

  • Variable Cost:

  • Costs that change in direct proportion to activity, such as the unit production cost of a product.

  • Average Cost:

  • The total cost divided by the number of goods produced.

  • Marginal Cost:

  • The cost incurred by producing one additional unit of a product.

Pricing Strategies:

• Mark-up Pricing:

- The cost of purchasing a product from a producer plus desired profit and expenses, necessitating calculation of an adequate gross margin.

Break-even Analysis

• Method:

  • To determine what sales volume must be reached before total revenue equals total costs, indicating no profit or loss.

Profit Calculation

• Total Cost Calculation:

  • $ext{Total Cost} = ext{Fixed Cost} + ext{Variable Cost}$

• Gross Profit Calculation:

  • Formula:
    $ext{Gross Profit} = ext{Revenue} - ext{Variable Cost}$

• Net Profit Calculation:

  • Formula:
    $ext{Net Profit} = ext{Gross Profit} - ext{Fixed Cost}$

Breakeven Point:

• Defined:

  • The number of units needed to be sold to cover all costs (both fixed and variable).

Donut Example for Understanding Profit Calculations

• Scenario:

  • Sam’s Donut Shop sells 1,200 donuts per day at a price of $1 each.

  • Variable Cost:

  • Cost to make each donut is $0.20.

  • Monthly Operations:

  • The donut shop operates for an average of 30 days per month.

  • Fixed Costs:

  • Example fixed costs (salaries, rent, utilities) total to $5,000 per month.

• Questions:

  • What is the total revenue per month?

  • What is the gross profit per month?

  • What is the breakeven point (number of donuts needed to be sold to cover fixed costs per month)?

Pricing Objectives

• Profit Oriented Pricing:

  • Profit Maximization vs. Satisfactory Profits:

  • Determining the extent of profit goals.

  • Breakeven Pricing:

  • Pricing determined to cover costs exactly.

  • Targeted Return on Investment (ROI):

  • Calculated as net profit after taxes divided by total assets.

  • Markup Pricing (Cost Plus):

  • Adds a specified markup percentage to cost.

Sales Oriented Pricing:

• Market Share Maximization and Sales Maximization:

  • Not a long-term goal related to profitability.

• Status Quo Pricing:

  • A strategic choice to maintain existing prices or meet competition.

• Value Based Pricing:

  • Most aligned with marketing philosophy and consumer perceived value.

Demand and Related Concepts

• Supply and Demand Curve and Equilibrium:

  • Graphical representation of market dynamics between supply and demand.

• Elasticity of Demand:

• Definition:

  • Responsiveness of quantity demanded to changes in price.

• Elastic Demand:

  • Demand is sensitive to price changes.

• Inelastic Demand:

  • Demand is relatively unresponsive to price changes.

• Factors Affecting Elasticity:

  • Availability of substitutes.

  • Price relative to purchasing power (example: cost of parts for a car company).

  • A product's other uses (example: steel).

  • Use of Prestige Pricing: Pricing high to maintain a luxury image.

Dynamic Pricing and AI in Pricing

Dynamic Pricing:

• Definition:

  • The practice of adjusting prices in real-time based on demand and market conditions.

  • Originated in the airline industry but applicable across various sectors.

• Surge Pricing:

  • Price adjustments that happen frequently (e.g., hourly), such as in Uber’s pricing model.

AI Integration in Pricing:

• Incorporation of historical and real-time data in pricing algorithms (structured and unstructured data).

  • Structured Data: Data such as products searched, time spent on webpages, items in shopping carts, purchases made.

  • Unstructured Data:

  • Social media references, personal lifestyle indicators that provide insights into consumer behavior and pricing sensitivity.

Product Life Cycle (PLC) and Pricing Strategy

Pricing Strategy by Stage:

• Introductory:

  • Price is set high to recapture development costs (price skimming).

• Growth:

  • Price stabilization as competitors emerge.

• Maturity:

  • Prices may decrease further due to rising competition.

• Decline:

  • Additional price drops to sustain market share.

Setting Price on a Product

Steps:

• 1. Set pricing goals: profit-oriented, sales-oriented, or status quo.

• 2. Estimate demand, costs, and profits:

  • Analyze total revenue at varying price points along with corresponding costs.

• 3. Choose pricing strategy:

  • Establish a long-term pricing framework for initial pricing and intended price movements.

Pricing Strategies:

• Price Skimming:

  • High initial prices for early adopters.

• Penetration Pricing:

  • Low introductory prices to attract mass market.

• Status Quo Pricing:

  • Matching the competition’s prices.

Fine-Tuning Base Price:

Base Price Adjustments:

• Discounts:

  • Quantity Discount:

  • Reduced price for purchasing larger quantities.

  • Cash Discount:

  • Price reduction for prompt payment.

  • Trade Discount:

  • Price reductions offered to specific groups.

  • Seasonal Discount:

  • Price reductions during specific times of the year.

  • Promotional Allowance:

  • Price rebates for promotional activities.

  • Rebate:

  • Refund provided after purchase.

  • Coupons, zero percent financing, free shipping: Various strategies to enhance perceived value.

Price Modification Tactics:

• Geographic Pricing:

  • Adjusts pricing based on geographic location.

  • Types include Uniform Delivery Pricing and Zone Pricing.

• Common Pricing Tactics:

  • Loss Leader Pricing:

  • Pricing strategically below cost to draw customers (e.g., casino buffets).

  • Bait Pricing:

  • Advertises deceptively low prices to attract customers.

  • Psychological Pricing:

  • Using odd/even pricing strategies; odd numbers often imply bargains, while even numbers suggest quality.

  • Two-Part Pricing:

  • Low hardware price combined with high software prices (common in amusement parks and gyms).

  • Price Bundling:

  • Two or more products sold together at a reduced price compared to individual prices.

  • Versioning:

  • Offering different product versions at different prices (e.g., exclusive items).

Legal Issues in Pricing

• Price Fixing:

  • Illegal agreement among competitors to control prices.

• Price Discrimination:

  • Charging different prices to different buyers for the same product, legality varies by circumstances.

• Predatory Pricing:

  • Intentionally setting low prices to eliminate competition; challenging to prove legally.

Additional Concepts

• Market Structures:

  • Monopolistic Competition, Pure Monopoly, Pure Competition, Oligopoly.

• Formulas:

  • Revenue:
    $ext{Revenue} = ext{Price per Unit} imes ext{Units Sold}$

  • Profit:
    $ext{Profit} = ext{Revenue} - ext{Cost}$

• Giffen Good:

  • A lower-priced item that sees increased demand with rising prices (e.g., rice).

• Breakeven Definition:

  • The point at which a business experiences neither profit nor loss.

• Other Definitions:

  • Cost:

  • The minimum price a company would want to charge for its product.

  • Geographic Pricing:

  • Ignores shipping costs when determining prices.

  • Status Quo Pricing:

  • Maintaining prices based on competition pricing.

  • Price Elasticity:

  • High elasticity when products are commoditized.

  • Price Skimming:

  • Charging high initial prices to target customers willing to pay.

  • Penetration Pricing:

  • Lower prices to capture large market shares quickly.

  • Mark-up Pricing:

  • Price set by adding a margin to the cost.

  • Psychological Pricing:

  • Prices set slightly below whole numbers for consumer appeal.

Chapter 20: Marketing Metrics

Subject: Principles of Marketing

• Instructor: Prof. Sam Lee

Marketing Metrics and Profitability

• Definition:

  • Marketing Metrics are essential tools in a market-oriented business, helping achieve profitable growth.

Key Areas of Focus:

• Understanding the importance of marketing metrics

• Measurement of marketing profitability and Marketing ROI (Return on Investment)

• Managing marketing profitability

Company Performance Assessment

• Question:

  • How would you assess the company’s performance over the past three years?

  • Options include:

  • Good

  • Average

  • Poor

Importance of Marketing Metrics

Insights Provided:

• Marketing metrics offer a valuable perspective on the overall performance of a company.

Question for Evaluation:

• How would you rate the marketing performance above?

  • Options include:

  • Good

  • Average

  • Poor

Key Performance Indicators (KPIs)

• Marketing Metrics Defined:

  • Indices required to assess business performance from a marketing viewpoint.

Common KPIs Include:

• Sales figures segmented by month, region, product

• Pricing data by month, region, product, competitor

• Top of Mind (TOM) awareness levels

• Purchase intent measures

• Customer Satisfaction metrics

Dashboards:

• Visual displays representing KPIs, providing at-a-glance insights.

Digital Marketing Dashboard Example

Platform: Klipfolio

• Website Performance (Past 30 Days):

  • Key Metrics:

  • Bounce Rate: 52.96%

  • Conversion Funnel Performance:

    • Traffic Sources (Last 30 Days):

    • Organic Users: 370,375 (Change: -6.2%▲)

    • Leads: 10,681 (Conversion Rate: 2.88%)

    • Referral Users: (Previous Conversion: 56.49%)

    • Opportunities: 1,546 (Wins: 488; Conversion Rate: 14.47%)

    • Direct Traffic: (31.56%)

    • Email Traffic: (Conversion Rate: 9.77% ▲)

    • Pageviews: 2.33 (Change: 9.77% ▲)

• HubSpot Revenue: This Month: $1,300,400$

• AdWords ROI (Last 30 Days): -92.23%, with previous period showing - 99.71%

• MailChimp Email List Performance:

  • List Size: 19 Members

  • Open Rate: 89.5%

  • Unsubscribe Rate: 0%

  • Click Rate: 26.3%

• Social Media Followers:

  • 21,500 Likes

  • 0 Unsubscribes

  • Specific follower counts highlighted for further divisions (e.g., g+)

Financial Metrics in Marketing

Unit Margin and Markup

• Definitions:

  • Unit Margin (percentage):
    $rac{( ext{Selling price per unit} - ext{Cost per unit}) imes 100}{ ext{Selling price per unit}}$

  • Markup (percentage):
    $rac{( ext{Selling price per unit} - ext{Cost per unit}) imes 100}{ ext{Cost per unit}}$

Application Questions:

• Question 1:

  • If the selling price is $10, cost is $3, calculate the unit margin (Kahoot #1).

• Question 2:

  • To achieve a 50% markup with a unit cost of $4, determine the selling price (Kahoot #2).

• Question 3:

  • What is the unit margin at this selling price? (Kahoot #3).

Contribution Margin Example

Scenario:

• A business sells 200 units with a revenue of $4,000, variable costs of $1,000, and fixed costs of $400.

Contribution Margin Calculation:

• Contribution Margin (CM):
  $ext{CM} = ext{Total Revenue} - ext{Total Variable Cost}$
  $ext{CM} = 4,000 - 1,000 = 3,000$

• Contribution Margin per unit:
  $ext{CM per unit} = rac{ ext{CM}}{ ext{Units Sold}}$
  $ext{CM per unit} = rac{3,000}{200} = 15$

Price Elasticity

Definition:

• Price Elasticity of demand measures the sensitivity of demand to price changes, calculated as the ratio of percent change in demand relative to percent change in price.

Elasticity Formula:

• $ext{Elasticity} = rac{( ext{Final demand} - ext{Initial demand})/ ext{Initial demand}}{( ext{Final price} - ext{Initial price})/ ext{Initial price}}$

Observations:

• Generally negative; increases in price lead to decreased demand.

• A question illustrating calculation:

  • If a 5% price rise leads to a 20% drop in demand, what is the price elasticity? (Kahoot #5)

• Price Elasticity Calculation:
  $ext{-20 / 5 = -4}$

Breakeven Analysis

Definition:

• The Breakeven Point is where total revenue equals total cost. This includes calculations for:

  • Breakeven Volume

  • Breakeven Revenue

  • Breakeven Market Share

Breakeven Formulas:

• $ext{Breakeven Volume} = rac{ ext{Total Fixed Costs}}{ ext{Contribution Margin per Unit}}$

• $ext{Breakeven Revenue} = ext{Breakeven Volume} imes ext{Selling Price per Unit}$

• $ext{Breakeven Market Share (units)} = rac{ ext{Breakeven Volume}}{ ext{Market Size in units}}$

• $ext{Breakeven Market Share (dollars)} = rac{ ext{Breakeven Revenue}}{ ext{Market Size in dollars}}$

Graphical Representation:

• Variable Costs and Revenues illustrated in a breakeven chart.

Breakeven Example: Donut Shop

Scenario:

• Selling price: $1 per donut

• Variable cost: $0.25 per donut

• Total fixed costs: $5,000/month

Breakeven Calculation:

• Contribution Margin per unit:
  $ext{Price} - ext{Variable Cost} = 1 - 0.25 = 0.75$

• Breakeven Volume:
  $rac{ ext{Total Fixed Costs}}{ ext{Contribution Margin}} = rac{5,000}{0.75} = 6,667$

Follow-Up Question:

• What does this signify? (Kahoot #6)

Additional Breakeven Calculations

New Scenario:

• Fixed Costs = $50,000, Selling Price = $20, Variable Cost = $10

Breakeven Volume Calculation:

• Follow similar previously illustrated calculations.

Customer Lifetime Value (CLV)

Definition:

• CLV estimates the total profit a company can expect from a single customer throughout their relationship with the firm.

CLV Formula:

• $ext{CLV} = ext{Net Present Value of All Future Earnings} - ext{Customer Acquisition Cost}$

Components:

• Calculation will involve customer revenues, costs, retention rates, discount rates, and acquisition costs.

Simplified for Exam:

• Assuming no time value of money (interest rate = 0%), and perfect retention (100%) means:

• $ext{CLV} = ext{Sum of All Future Earnings} - ext{Acquisition Cost}$

CLV Case Study Example

Scenario:

• Customer purchases of $50 monthly for 24 months, Cost of goods = $10, Customer acquisition cost = $400

Calculation Steps:

• Gross profit per month = $50 - 10 = 40$

• Lifetime profit = $40 imes 24 = 960$

• CLV Calculation:
  $960 - 400 = 560$

Implications of this Calculation:

• Assessing profitability from customer relationships.

CLV Further Examples

Company Charging $60 Monthly:

• Cost per customer = $20, Acquisition cost = $200

• Breakeven time calculation:

• Results in:
  $ext{Breakeven Time} = rac{ ext{Total Fixed Costs}}{ ext{Gross Margin}}$

• Gross Margin calculated from revenue minus cost.

CLV Example for Profitability

Customer Purchases:

• $100 monthly, Cost of goods $30, Acquisition cost = $700

Calculation to Find Months to Breakeven:

• Gross profit per month = $100 - 30 = 70$

• Months to breakeven = $rac{700}{70} = 10$

Conclusion on Implications:

• Understanding CLV helps firms align their marketing strategies.

Importance of Customer Lifetime Value (CLV)

Key Point:

• Calculating CLV is crucial for evaluating the viability of marketing and pricing strategies, valuable in assessing customer relationship strategies.

Measuring Customer Sentiment

Insight:

• Non-financial marketing metrics often gauge perceptions, highlighting the need to establish valid measures.

Examples of Metrics Include:

• Attitudes towards the brand, brand image, and preference metrics.

Measurement Consideration:

• Ensure differences in perceptions are accurately represented in the assessment scales used.

Brand Loyalty Measurement Questions

7-Point Scale Questions for Brand Loyalty:

1. "I will buy this brand the next time I purchase this product."

2. "I intend to keep purchasing this brand."

3. "I am committed to this brand."

4. "I would pay a higher price for this brand over alternatives."

Application Method:

• Discuss methods to derive a quantified brand loyalty score from responses.